Suspect brothers believed dead after shootout at factory

Two brothers suspected of slaughtering 12 people at the Charlie Hebdo magazine were killed when security forces stormed a building they were holed up in and freed a hostage, sources close to the investigation say.

The heavily-armed brothers Cherif Kouachi, 32, and Said, 34, had been inside the building holding a 26-year-old man hostage for a number of hours and told authorities they want to "die as martyrs".

As night fell on Friday explosions rang out when heavily-armed commandos made their move on a small printing firm in Dammartin-en-Goele northeast of Paris, killing the two Charlie Hebdo massacre suspects.

One police officer was injured.

The brothers, suspected of killing 12 people at the Charlie Hebdo officers on Wednesday, had come out firing on security forces, a source told AFP.

The hostage drama earlier unfolded at the printing business in the small town of Dammartin-en-Goele, 41km from Paris and only 12km from Charles de Gaulle airport.

The heavily-armed Kouachi brothers stormed the building wearing body armour and carrying AK-47 assault rifles and pretended to be police officers, a witness said.

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Seven people were inside the building when the gunmen entered with only one captured and held hostage, a local politician said.

Police had already exchanged fire with the pair in a high-speed car chase, with no casualties reported from the shootout.

The suspects had hijacked a Peugeot 206 nearby from a woman who said she recognised them as the brothers, Cherif and Said Kouachi, accused of killing 12 people in Wednesday's attack on the satirical weekly Charlie Hebdo, which repeatedly lampooned the Prophet Mohammed.

Reporters rushing to the scene were turned back by heavily armed police officers as authorities established a "war zone" perimeter around the industrial complex.

A worker in the suburb of Dammartin-en-Goele told Le Monde that police had shut down the area when shots were fired.

"I work in the Kuehne Nagel warehouse in the industrial area. There is a half hour or so I heard two gunshots and within five minutes there was all this security, police helicopters. We were forbidden to be near windows must remain inside the warehouse," the worker said.

"I saw the GIGN [counter-terror special forces] and the Gendarmerie getting in position. I had the impression that they [suspects] were there. They arrived at 9am and it was very stressful."

The tense endgame comes as it emerged the brothers had been on a US terror watch list "for years".

Police vans are lined up in Dammartin-en-Goele. (AAP)The printing business where the gunmen are holding hostages. (Supplied)

French authorities raised the security alert to the highest possible level in the region of Picardy, to the northeast of Paris, as forces tightened their noose on the brothers, Cherif Kouachi, 32 and Said, 34.

Around 24 hours into the manhunt, the brothers were identified after holding up a petrol station 80km from Paris.

Helicopters buzzed overhead during the night and paramilitary forces were preparing to step up their house-to-house searches.

Police try to control the unfolding hostage drama. (Supplied)A number of choppers were deployed in the manhunt. (Supplied)

"I don't understand: the police are dressed like Robocops in the streets, but they let us move about freely. What if we came face-to-face with them, what do we do?" asked one woman, who gave her name as Carole.

French Interior Minister Bernard Cazeneuve announced that a total of 88,000 security forces were mobilised across the country and that an international meeting on terrorism would take place in Paris on Sunday.

Nine people had already been detained as part of the operation, Cazeneuve said.

In a near simultaneous police raid another gunman was also reported killed and several hostages freed unhurt from a Jewish kosher grocery store in eastern Paris.

After several explosions, police stormed the shop in Portes de Vincennes and the hostages were escorted from the store shortly afterwards and taken to safety.

A source told AFP the hostage-taker had been "neutralised".

Police believe he was the gunman who shot dead a policewoman in Paris on Thursday and he has been linked to the Charlie Hebdo suspects.

Meanwhile, questions mounted as to how a pair well-known for jihadist views could have slipped through the net and attack Charlie Hebdo, apparently in revenge for the weekly's repeated publication of cartoons mocking the Prophet Mohammed.